Sleeping with the enemy is tough decision

NAFCU and CUNA often take the same position on major credit union issues. This frequent strolling hand in hand up the Capitol steps over the years has caused some observers to ask from time to time, "Why do credit unions need to support two national trade groups?" There are other times where NAFCU and CUNA definitely don't see eye to eye on an issue and take opposite positions. NAFCU officials point proudly to a number of well documented examples throughout their existence where eventually the NAFCU position prevailed. A current front burner issue is the proposed new credit card law in California and the lawsuit to derail it that it spawned. It is the most recent example of NAFCU and CUNA coming down on opposite sides of an issue. The different approaches by the two CU trade groups caused another question to re-surface, mostly among NAFCU members: "Isn't it clear why credit unions need two national trade groups?" As with previous hot issues where NAFCU and CUNA disagreed and developed separate strategies to address a threat, only time will tell which group made the right decision? You can be sure members will let both know. To refresh readers' memories about the aforementioned California lawsuit: in a nutshell, a new law, that was scheduled to go into effect on July1, 2002, would mandate that any bank or credit union in California require their credit card holders to pay at least 10% of their outstanding balances each month. If the financial institutions chose not to institute such a requirement, card insurers would be required to set up toll-free call centers and to provide card holders expensive and complex written disclosures outlining exactly what the costs would be for making lesser payments each month. A coalition of credit card insurers and national bank trade groups filed suit to prevent the law's enactment. The coalition argued that if successful, the California law could become precedent setting. This, they said, would make costs to card issuers exorbitant. Besides, they added, the California law would illegally preempt federal law in the case of federally chartered institutions. No mention was made of federally insured, state charters. NAFCU choose to join the coalition of primarily banking industry connected organizations and support its effort to halt enactment. NAFCU's reasoning was that federal credit unions (its members) would be significantly harmed if the law was enacted. CUNA on the other hand decided not to enter the fray, saying that doing so would contradict its long and strong support of bankruptcy reform legislation. In addition, it would position CUNA as anti-consumer and anger consumer advocate allies. When I first learned that NAFCU had decided to sleep with the enemy, namely, banks, credit card insurers, and especially with banking trade groups such as the American Bankers Association, I have to confess I thought they had made a mistake. As further details unfolded, I began to understand NAFCU's logic and I changed my mind. Now I firmly believe that NAFCU did the right thing. Rather than file a costly lawsuit on its own, the organization lent its support to an ongoing and more powerful effort, the banking coalition. NAFCU made a conscientious choice to represent first and foremost its members, credit unions that would be severely impacted by the new law if enacted. Although it didn't feel it could wait for an answer with the July 1 enactment date close at hand, NAFCU did seek an opinion from NCUA. They asked the federal regulator to go on record that the California law would attempt to pre-empt federal statutes. NCUA did just that in a June 26 letter, for which the agency received praise from both NAFCU and even from old nemesis ABA. NAFCU leaders knew that their support would be controversial. In fact, they fully expected to be branded anti-consumer, which they were indirectly by the Consumer Federation of America (CFA). Certainly NAFCU didn't do it alone, but as the only CU group joining hands with the enemy for this fight, they certainly helped successfully convince a judge to grant a stay as July 1 approached. This doesn't mean the battle is over. The judge in the case made it clear that the stay meant only that each side now had sufficient time to prove its argument before a final decision would be rendered. Meanwhile, CUNA pretty much watched the proceedings from the sidelines; a move that initially I thought made sense. After all, with its well established reputation as a consumer advocate, CUNA concluded that it had much to lose if it became an active participant. CUNA did not want to risk being labeled anti-consumer. By staying off the playing field, CUNA was lauded in a letter from the CFA for its pro-consumer stance. Just my opinion, but it struck me that it was mighty coincidental that CUNA received and publicized a letter praising their lack of action from CFA just about the time their non-involvement decision was being questioned in some CU circles. Could it have been requested? It seems to me that whatever points CUNA gained from positioning itself as a consumer advocate first, it may have lost as the group representing the best interests of its member credit unions. In fairness, connecting the lawsuit to the still bogged down bankruptcy reform package made sense. Still does. CUNA, too, eventually went to NCUA, but to urge them to get into the controversy on behalf of federal and federally insured credit unions. If NCUA led the charge, CUNA appeared to reason; it can continue to stay in the bleachers. Credit union trade associations, in fact all trade groups, are expected to make difficult decisions. Many of these actions can come back to haunt decisions makers, but they must be made nevertheless. NAFCU leadership deserves credit for doing what individual credit union leaders do every day, putting members first. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail mwelch@cutimes.com.